A case study in successfully implementing PPP: Annett Bus Lines keeps team together

The Paycheck Protection Program has been an anchor for the family-owned Annett Bus Lines in Sebring, Florida as the operator weathers the pandemic-triggered economic crisis. 

The experience of the second-generation owners, Brian and David Annett, with the potentially forgivable federal loan offers a case study of how the PPP can be a lifeline as companies wait for business to resume. 

“The PPP has been a blessing for us,” said Brian Annett, describing the program as a tool to take care of employees.

Nearly 60% of the country’s more than 30 million small businesses have applied for PPP loans, with early 14% of those applications have been funded. By contrast 89% of United Motorcoach Association members surveyed reported they applied for the loan, with more than 73% approved. 

The Annett brothers shared their insights and tips about making the best use of these federal stimulus dollars during an UMA Town Hall session on May 21.

“We looked at PPP right off the bat as something that instantly kept our heads above water and kept our company intact,” said David Annett, whose company received the PPP loan in mid-April.  “It’s like hitting the pause button and moving the company from now until eight weeks into the future and keeping us intact.”

Future still cloudy

Unfortunately, the brothers’ view of their future is still as cloudy as it was in mid-March, when their business shut down. While they are in a period where revenue remains uncertain, they want to keep their 115-person workforce, especially hard-to-find drivers.

The biggest objection they have heard in the motorcoach industry about taking the PPP is that employees would rather collect the federal government’s boost to state unemployment that adds $600 to the weekly benefit than come back to work.

“However,  the employees who ended up slightly below the state plus federal unemployment max benefit were ecstatic because they don’t have to go through the unemployment process,” said David Annett.

He added that terms of PPP allow employers the flexibility to pay employees at their higher averages during the eight-week period, subject to a maximum amount clearly defined in the CARES Act.

 Only two Annett Bus Lines employees balked at giving up unemployment benefits and were told a refusal to come back would be effectively a resignation, so if they try to get unemployment, their termination would be reported as a resignation.  Both employees ended up accepting the offers to come back and receive the PPP benefits, so Annett was able to pay 100% of their employees who were with them at the start of the crisis.

Inflexibility criticized

The program has been criticized for not being flexible enough for industries that have dealt with or continue to deal with state and locally mandated stay-at-home orders that have kept many businesses closed or operating at reduced capacity. 

The brothers say they weren’t hung up about whether their employees actually worked for the PPP-funded pay since they don’t have business right now. Due to Florida’s shelter-in-place order, employees stayed home the first three weeks they received paychecks through the PPP. 

“There’s not enough work to pay our employees to actually go out and ride the bus down the road or come to the office and work. The Program’s aim was to give money to the employees, working or not. I’m very happy with the way our employees have reacted to it, and they are very appreciative of what we’ve done,” David Annett said. “There was a solid sense among our employees that the Company was fighting for them by providing PPP funds and not leaving them at the mercy of an overwhelmed state unemployment system.”

Not bringing back all employees defeats the purpose, the Annetts said, and will mean not qualifying for the forgiveness provision, and you’re going to end up with a loan. Borrowers must spend at least 75% of the funds on payroll costs to qualify for full loan forgiveness. The remainder, which is essentially “free money”, can be used on approved fixed costs such as utilities, rents and interest payments on vehicles. 

“While you may be paying those people, if you’re not paying everybody, you’re gonna suffer at the hands of the PPP penalty which result in having to pay back the PPP loan. We didn’t want to have a situation where forgiveness would be in question,” said David Annett, noting the company is on a pace to spend 81% on payroll and related costs. 

‘Profit replacement’

Brian Annett added that the money turns into potential “profit replacement.” if PPP funds are available at the same time that business returns, because personnel costs, approximately 35-40% of revenue for most operators, are effectively forgiven. While the loan is based on 10 weeks of payroll, the payback period is eight weeks, providing funds to spend on non-payroll costs. There are ways that you can work through those scenarios to maximize the benefit of the program, he said. The company’s employees have enjoyed collecting a check weekly as opposed to navigating the state’s unemployment system.

“Our thing with PPP was to let us keep our people, let us continue to control that process. It’s been good,” said Brian Annett. “We hate that it’s coming to an end. It’s our hope to get a chance to swing at it again, especially if some rules are relaxed and we can get a little smarter about how we massage the different ratios. It’s a tool. I believe that, if every company got PPP through the return of the business, we would see very few failures.”

“PPP is still the only currently available form of government assistance which is potentially forgivable, which provides some direct benefit not only to our employees but to our company as a whole,” said David Annett.

An extension of the PPP was part of “The Ask” by UMA to Congress that was promoted during the May 13 rolling rally in Washington, D.C. The Small Business Administration has approved more than 4.4 million PPP loans totaling more than $511 billion, leaving about $138 billion in PPP funds available, as of May 23, according to the Journal of Accountancy. 

On Thursday, the Democratic-run House voted in favor of a bipartisan bill that would give small businesses more time to use emergency loans and let borrowers spend 60% of their loan on payroll.

The Senate is looking at similar legislation to create additional flexibility within the SBA’s Paycheck Program. Provisions under consideration are extending the clock for the 8 week period of loan forgiveness – and the deadline for applying for the loan – out to December 31, 2020, eliminating the rule requiring Paycheck Protection Program borrowers to spend at least 75% of the funds on payroll costs to qualify for full loan forgiveness, delaying payment of payroll taxes for Paycheck Protection Program borrowers and making Personal Protection Equipment (PPE) and other adaptive equipment to re-open safely eligible for loan expenses, shared Becky Weber, managing director of the government relations firm Prime Policy Group and a UMA lobbyist, during the webinar.


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